Do you estimate the value of your house for insurance based on the purchase price? This mistake could cost you over 50% of your compensation in the event of a claim. We show you how to determine the correct insurance value based on data and fully protect yourself.
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The topic briefly and concisely
The market value (sale price) is irrelevant for the building insurance; what matters is the reconstruction value (new construction value).
The insurance amount is calculated using the 'value 1914' and the annual construction price index to create a stable basis.
Underinsurance results in partial damages being reimbursed only proportionally, leading to high out-of-pocket expenses.
Did you know that most property owners incorrectly estimate the value of their home for insurance purposes? They rely on the purchase price or current market values, risking significant underinsurance. An error of just 20% can lead insurers to drastically reduce their payouts in the event of a claim. This article explains the '1914 value' and the adjustable new value method used by insurers. This way, you can have the value of your house estimated for insurance purposes and be protected against unpleasant surprises in serious situations.
The Foundation: Why the Market Value for the Policy Doesn't Count
The sales value of your property reflects current market demand, not the actual reconstruction costs. Insurances do not use the comparison value to calculate the policy but rather the intrinsic value. A property can be sold for €500,000, but rebuilding it after a fire may cost €650,000. This 30% difference is the root of most underinsurance cases. Online valuations often only provide a market value and are therefore unsuitable for insurance purposes. The correct property valuation for insurance is based on a different logic. This logic ensures that you receive the funds for an identical rebuild in the event of damage.
The 1914 Value: The Key Metric of Your Insurance
Insurers require a stable, inflation-independent basis for calculations. For this purpose, the "1914 value" was created, a fictional calculation value. It represents the theoretical construction costs of your property in 1914 in gold marks, the last year with stable construction prices. This value is the solid foundation of your entire policy. To obtain today's reconstruction value, the 1914 value is multiplied by the construction price index published annually by the Federal Statistical Office. An incorrect 1914 value inevitably leads to an incorrect insurance sum. Correct determination is therefore not an option, but a necessity for your protection.
This is how insurers determine the 1914 value
The determination is carried out via a detailed questionnaire or an expert report. The following factors are central:
Building type: Is it a detached house, a terraced house, or a multi-family house?
Construction method: Solid construction or prefabricated house? Which materials were used for the walls and roof?
Equipment: Is there parquet flooring, a sauna, or a conservatory? High-quality equipment significantly increases the value.
Enclosed space: The cubic meters of the building are a common basis for calculation.
Living area: The exact square meter count of all living spaces is crucial.
Outbuildings: Garages, carports, or converted sheds must also be recorded.
Each of these points influences the final calculation by several percentage points.
Current Replacement Value: Your Protection Against Rising Construction Costs
What is the use of a correct insurance sum when construction costs are skyrocketing? This is where the Adjustable New Value Insurance comes into play. It automatically adjusts your insurance sum annually to reflect changes in construction costs. This uses the so-called adjustable new value factor, which is based on the construction price index. For the year 2025, the adjustment factor is 26.51. This automatic adjustment is your most important protection against gradual underinsurance. Without this mechanism, your correctly calculated insurance sum from five years ago would now have a coverage gap of over 30%. Check your policy to see if the adjustable new value is agreed upon.
The costly consequences of underinsurance: An example calculation
Underinsurance is often discovered only in the event of a claim – with disastrous consequences. If the actual rebuild value of your property is £500,000, but your insured sum is only £400,000, you are underinsured by 20%. The insurer will then only settle any partial claims proportionately, as well as any total loss. For a water damage claim of £30,000, the insurer will refund only 80%, which is £24,000. You are left to cover the remaining £6,000 yourself. This principle of pro-rata reduction is one of the biggest financial risks for property owners. An accurate valuation from the start can prevent such scenarios.
Common Causes of Undetected Underinsurance
A coverage gap often occurs gradually and unnoticed. The most common reasons are:
Unreported modernisations: A new roof, a conservatory, or energy-efficient renovations can increase the property value by up to 25%.
Incorrect calculation of living area: Hobby rooms in the basement or converted loft spaces are often forgotten, which can lead to discrepancies of over 15%.
Use of purchase price: In many regions, the purchase price is 10-20% below the actual reconstruction costs.
No regular reviews: A policy that is 10 years old no longer reflects today's costs, even with flexible new value.
Therefore, a regular review every 3-5 years is essential.
Strategies for accurate valuation of your property
There are two proven methods to correctly estimate the value of your home for insurance purposes. For standard properties, the insurer's valuation scheme is often sufficient. In this process, you fill out a form with all the relevant data regarding construction type, size, and features. Be extremely precise here, as even small errors can lead to deviations of 5-10%. For older, renovated, or architecturally unique properties, a short appraisal by an expert is the better choice. The costs for this usually remain under €1,000 but ensure an accurate amount. This investment protects you from losses that can easily reach 50 times that amount. A data-supported appraisal provides you with the necessary security and a solid basis for negotiation. With our ImmoGPT, you can make an initial assessment and uncover potential coverage gaps.
Conclusion: Proactive assessment as the key to financial security
The assessment of your house value for insurance is not a one-time task but an ongoing process. Never rely on the market value; instead, insist on a calculation based on the 1914 value and a policy with adjustable new value. An underestimation of just 15% can be life-threatening in serious cases. A professional, data-driven valuation by Auctoa gives you the assurance that your biggest asset is fully protected. Act now before any damage occurs.
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Additional useful links
Statistisches Bundesamt offers comprehensive information on construction prices and real estate price indices.
Verbraucherzentrale provides an informative article on home insurance for homeowners.
Bundesbank delivers detailed information on the indicator system for the residential real estate market.
GDV (Gesamtverband der Deutschen Versicherungswirtschaft) offers important information on home insurance.
Verband deutscher Pfandbriefbanken provides information on the loan-to-value ratio and its significance.
Statistisches Bundesamt provides up-to-date tables on house prices and land prices.
Verbraucherzentrale offers a helpful article on insurance protection against natural hazards.
FAQ
Why is the value 1914 the basis for home insurance?
The year 1914 was chosen because that was the last time construction prices in Germany were stable, and the currency was backed by gold. This fixed reference value allows insurers to calculate an inflation-adjusted and consistent insurance sum by multiplying it with the annual construction price index.
What happens if I don't report a renovation to my insurance?
If you do not report a value-enhancing measure (e.g. attic conversion, new heating system), underinsurance will occur. In the event of a claim, the insurer will proportionally reduce the benefit, as the insurance sum no longer reflects the actual value of the building.
Does the insurance cover all costs at the current replacement value?
Yes, insurance at replacement value is designed to cover the costs for the complete reconstruction at current prices. Additionally, it often includes coverage for clearance, demolition, and movement costs up to a certain limit.
Is an expensive assessment always necessary?
Not always. For newer standard properties, the insurer's valuation is often sufficient. However, for older buildings, half-timbered houses, luxury properties, or after extensive renovations, an appraisal is highly recommended to ensure an accurate and reliable valuation.
What is the sliding new value factor?
The sliding new value factor is a metric that is adjusted annually to reflect the development of construction prices and wages. This factor is used to calculate the insurance premium for the coming year to keep the insured amount current and prevent underinsurance.
Does Auctoa assist with insurance valuation?
Yes, Auctoa offers data-driven property valuations that provide an accurate basis for determining the reinstatement value. Our analyses help you to set the correct value for your insurance policy and minimize financial risks.
